The Brazilian National Agency of Petroleum, Natural Gas and Biofuels (ANP) determined the reduction of royalty obligations for E&P Small and Medium Enterprises (SMEs), as a means to improve output levels and regional socio-economic development. According to ANP, 113 oil fields are operated by SMEs, mainly in the Brazilian Northeast.
Resolution n.º 853/2021 from the Brazilian National Agency of Petroleum, Natural Gas and Biofuels (ANP) enacted the reduction of royalty obligations for E&P Small and Medium Enterprises (SMEs), whose conceded oil and natural gas fields are explored by a single SME firm or a consortium of SME firms. The resolution was the subject of Public Consultation n.º 19/2020, reported in the 18th edition of the Regulatory Report.
The resolution (article 9) provided the reduction of the royalty rate to 5% for small enterprises and 7.5% for medium enterprises, according to the ANP definition of company sizes (ANP Resolution n. 32/2014). To benefit from the reduction, SME oil and gas field operations must formally request the reduction to ANP, for each field under their operation. Other conditions are described in article 5. As provided in article 6, once a request is made, ANP has 90 days to analyze the request. Once the request is accepted, the concessionary E&P SME and ANP must conclude a contractual amendment in 30 days (article 7). Other conditions related to the contractual amendment are provided in articles 10 to 12.
According to ANP, the royalty rate reductions for E&P SMEs are designed to improve the productivity of the oil and gas fields conceded to SME operators, by increasing margins and extending their life cycles. In turn, it is expected that the increase in production levels will return socio-economic benefits and industrial development to their regions. According to the agency, 113 oil and gas fields are operated by SMEs, of which 15 have had no output in 2021. ANP estimates that 52 fields in the state of Rio Grande do Norte, and 30 fields in the state of Bahia may claim benefits.
